The Power of Perspectives

The Canadian Bar Association

Kim Covert

Digital tsunami in the boardroom

April 21 2015 21 April 2015

We’ve come a long way from the 17th century, when the governor of the first publicly traded company, the Dutch East India Company, carried out genocide on an Indonesian island in order to secure a monopoly on nutmeg, then a highly priced spice.

And business people no longer meet in coffee shops to trade shares and get up to date on news of the markets, as they once did.

But other than that the issues that plagued and bedeviled publicly traded companies 400 years ago read pretty much like today’s business pages, up to and including boards of directors who don’t pay enough attention to their company’s business.

That was the summation of David Beatty, a professor at the Rotman School of Management at the University of Toronto, as he took lawyers attending the 2015 CCCA National Conference through a short history of corporations – and board-of-director inertia.

Canada is ranked #1 in corporate governance of publicly traded companies around the world, but it’s not by accident – Canada works hard for its placement by investing in director education, and the yearly measuring of activity through the Globe and Mail’s “Board Games” which keeps everyone aware of the everyone else’s performance.

Still, Beatty isn’t handing out terribly high marks to Canada’s director class. After surveying the history of corporations he previewed a bleak snapshot of the future. A “digital tsunami” has arrived in corporate Canada, he says, and no one is prepared for it. Cyber threats surpass terrorism on the list of global threats, according to SEC Chair Mary Joe White, but directors remain ignorant – perhaps even willfully so – of the risks to their firms.

For example, board members tend not to know how much money companies are spending on capital allocations to IT. Boards of companies such as Home Depot or Target have not challenged the continuing employment of C-suite executives following major data breaches.

Furthermore, and perhaps most importantly, they’re not thinking about the impact of social media, when he says social media invasion is the biggest threat to the business model. He points to the time it took the Centreplate board to get rid of its CEO after a video of him kicking a dog in an elevator went viral.

Beatty titled his presentation “The Revolution in Corporate Boardrooms.” It sounded like he’s saying he wants one.

Photo: David Beatty, professor at the Rotman School of Management

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